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    Published on: February 23, 2017


    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here, and this is FaceTime with the Content Guy.

    A little over a month ago, I did an Eye-Opener about Staples. The company had just announced a voice-enabled Easy Button that it said would allow people to order products even more easily, using technology similar to that being employed by Amazon in its Echo/Alexa system. It happened that the same week, I'd gone through the laborious process of going to my local Staples to get a new chair for my office, which was an awful experience.

    My point was this - that as important as it is for traditional retailers to embrace new technologies and find new ways to connect to shoppers, it is just as important to create a store experience that is compelling to the customer. "Omnichannel" is a word that probably is overused, but if bricks-and-mortar stores really want to compete with Amazon, they really have to focus on the in-store experience.

    That means a differentiated physical experience. And it means having people who add to the experience, not make it worse.

    Even in a world of e-commerce and technology, the physical experience matters. If the bricks-and-mortar are thrown together haphazardly, they won't serve as any sort of advantage at all.

    My argument last month was that Staples didn't do any of these things. All they did was make me never want to shop there again.

    And so it was more than a little ironic that when I was driving by the other day, I noticed that the Staples store that was so awful now is closed.

    There probably are plenty of reasons that this unit closed, but I have to believe that at least part of the reason it wasn't worth keeping open is that the company and its people did absolutely nothing to make it worth keeping open.

    That's the bottom line. I've been to other Staples stores where the experience was almost as bad as it was here. I f they don't fix this basic problem - lackluster stores, people who don't care, adding up to a retail experience that is barely mediocre - there are going to be a lot more of these dotting the landscape.

    That's a lesson every retailer should take seriously.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: February 23, 2017

    by Kevin Coupe

    One of my memories about growing up - and this pretty much establishes how old I am - is of the milkman making deliveries to our home. There was this metal box that would sit outside our backdoor, and a few times a week the milkman would pull up in his truck and deliver glass bottles of cold milk, picking up the empties. My recollection is that he'd do this a couple of times a week, and that the main reason we stopped using the milkman was that my mom and dad decided to have seven children, which made mandatory frequent trips to the supermarket or convenience store to pick up gallons of milk.

    (My dad was a teacher, so funds were limited. He'd take those gallons and mix them with powdered milk so he could make them go twice as far. He used to tell us that it tasted the same. He was wrong. But there always was cold milk in the refrigerator.)

    I tell you all this because there was a story from CBS News the other day about the resurgence of the milkman in New York City.

    Friends Frank Acosta and Matt Malone started up a company called Manhattan Milk, creating s relationship with "a local farm upstate and educating themselves on how to make a GMO (genetically modified organism) free product."

    A decade after starting the company, "eight trucks fill the fleet delivering to all of Manhattan, Brooklyn, the Bronx, Long Island City, and Westchester. They promise to deliver, from residential to commercial.

    "Customers wake to find fresh products left in refrigerated boxes outside their door. And it’s more than just milk, there’s also eggs and locally grown fruits and vegetables."

    And, Acosta says, "Our clients can text us, call us, last minute, and we get the milk to them."

    What strikes me as interesting about this story is that these guys are simply reinventing a service that existed for decades before supermarkets supplanted them, and now, using technology as an enabler, are able to offer that service in more efficient and effective ways.

    So much of what is new about retailing really isn't new at all. Much of it is all about satisfying customer needs that have been around for a long time, but simply require a little rethinking, a little reinvention, and a little renewed respect.

    It is, when you think about it, an Eye-Opener.
    KC's View:

    Published on: February 23, 2017

    USA Today reports that Amazon has applied for a liquor license for its almost-complete grocery store in Seattle, which has been described in planning documents as "a new model of grocery shopping.”

    According to the story, "Customers place their orders online, then drive by during a specific 15-minute to two-hour window and have their groceries delivered to their cars ... From the city planning documents, it appears there will be little or no shelves of food and other items to choose from. Instead, all ordering must be done online. The lion's share of the space is devoted to food storage.

    "Customers who walk in will order from provided electronic tablets and then wait in the 'retail room' for their order to be brought to them, according to the documents."

    Retail experts who have seen the plans describe them as showing a facility that is "super efficient," and likely to be extremely competitive "on costs and labor."

    No opening date has yet been set for the Seattle store, nor for similar stores that are said to be on tap for Silicon Valley.
    KC's View:
    I think that the one thing we can count on is that whatever this store looks like and however it operates, it will break the mold to some degree. Because at Amazon today is always day one, they seem unencumbered by how things always have been done ... and in fact look to separate themselves from traditional models at every juncture.

    Good for them.

    Published on: February 23, 2017

    Walgreen this week said that it is designating more than 50 of its pharmacies as specializing in cancer treatment, staffed by pharmacists and technicians who have been trained to provide education to patients dealing with cancer diagnoses.

    The training - developed in part by the Leukemia & Lymphoma Society - will focus on a wide range of cancers and will allow Walgreen staffers to more effectively help patients with questions about their medications and treatments.
    KC's View:
    This is a very good idea. It is, however, ironic that Walgreen remains the only one of the two major drug store chains that still sells tobacco products.

    Published on: February 23, 2017

    BGR News reports that United Parcel Service (UPS) is testing "a delivery drone concept that doesn’t so much do away with its iconic brown box trucks as augment them ... using a specially equipped UPS delivery truck which has a drone compartment built right into its roof. When the driver stops to deliver a package, the drone can be sent out to deliver one to a nearby location as well. UPS used the example of a rural delivery where sending a driver and truck down a long, winding road would be less efficient than sending the drone to deliver the package instead."

    The drone then returns to the truck, where it automatically recharges for its next flight.

    The UPS drone reportedly can carry packages of up to 10 pounds, double the reported weight limit for drones that Amazon has been testing.
    KC's View:
    To be sure, this drone program - like Amazon's, and everybody else's - still faces regulatory hurdles before it can be implemented beyond the testing phase. But the various developments in the drone delivery business, and what appears to be increased pliability on the part of the Federal Aviation Administration (FAA), seem to point to the inevitability of delivery drones dotting the sky in the not-too-distant future.

    Published on: February 23, 2017

    In Minnesota, the Star Tribune reports that Hy-Vee continues its disruption of the Twin Cities market, opening a store in Savage this week that "features several firsts, including a cosmetics and beauty department called Basin and several new grab-and-go food offerings. A store it plans to open next year in White Bear Lake will have a fitness center in the mix with takeout foods, restaurants, clothing, and, oh yeah, groceries."

    The 24-hour Savage store "also includes amenities found at other Twin Cities locations, such as a Market Grille restaurant, Juice & Smoothies Island, Hickory House comfort foods, Cocina Mexicana made to order, a bagel shop, F & F fashions for the family, as well as a pharmacy with drive-up, Starbucks, dry cleaning and postal service. It adds Dia Pida Italian Street Food, Long Island Deli sandwich shop, Hibachi Asian Grill and a 'produce butcher,' who will chop, slice, dice, mince or julienne fruits and vegetables to order at no charge."

    The story notes that "Hy-Vee plans to open two more stores in the Twin Cities this year: Cottage Grove in the summer and Shakopee in the fall. Other stores in the pipeline include Farmington, two locations in Maple Grove, Columbia Heights, Robbinsdale, Chaska and White Bear Lake." CEO Randy Edeker said that "plans to make the Twin Cities its biggest market remain on track."
    KC's View:

    Published on: February 23, 2017

    Bloomberg has a good piece about Amazon which starts with this premise:

    "Which is the real Amazon.com Inc.? Is it the company whose 2016 operating profit was five times the level of three years earlier? Or is it the Amazon that has mostly delivered minuscule profits and instead redirected nearly every dollar in sales toward its mission of world domination?

    "Believe in history. It's the latter."

    The explanation can be found here.

    By the way ... the story suggests that the latter is approach is not necessarily bad or wrong. However, it also says that "investors should realize that is the species they are taking home when they buy into Amazon. It's important to understand what Amazon truly is and not be deluded into thinking it is something that it's not."
    KC's View:
    Investors should know what they're buying into. Competitors should know what they are battling against.

    Published on: February 23, 2017

    Bloomberg reports that Jet, which was acquired by Walmart last year for $3.3 billion in an effort to reinvigorate an e-commerce business that was not working, has begun offering "Wal-Mart’s in-house brands including Great Value, Equate and Sam’s Choice now that the companies’ online order-fulfillment centers have been linked up."

    Walmart's and Jet's sites still are being operated separately, targeting different customers, but the companies seem to believe that this will allow them to fill in assortment gaps and make them more relevant to shoppers.

    Bloomberg notes that "the development comes as Wal-Mart’s U.S. online revenue rose by double digits for the third straight quarter, helping results over the holiday period beat analysts’ estimates. The online unit’s so-called gross merchandise value, which includes sales made by third parties on its Marketplace site, increased 36 percent in the period ended Jan. 31. Wal-Mart now offers 35 million items on Marketplace, a quadrupling from a year ago."
    KC's View:

    Published on: February 23, 2017

    Barron's reports that Amazon appears to be interested in getting into the business of selling tickets to live events such as concerts and sports venues, a business into which it has successfully expanded in the UK. However, in the US "Ticketmaster could stand in its way. Ticketmaster, owned by Live Nation, has exclusive or nearly exclusive deals with many big U.S. venues ... These existing arrangements could make it hard for Amazon to crack the industry."

    However, observers say that Amazon's sheer size could give it an enormous advantage if it really wants to break into the business, since it has existing relationships with millions of customers - and access to their shopping histories - that would allow it to target and cater to people's interests and preferences.
    KC's View:

    Published on: February 23, 2017

    • The New York Times reports that several years after Mexico imposed a big soda tax, "sugary drink sales fell by 5.5 percent in 2014 compared with the year before, and by 9.7 percent in 2015 (again compared with 2013) ... the largest reductions were among the poorest Mexicans."

    The Times writes that "the finding represents the best evidence to date of how sizable taxes on sugary drinks, increasingly favored by large American cities, may influence consumer behavior. The results could have consequences for public health. But they also matter for policy makers who hope to use the money raised by such taxes to fund other projects. Philadelphia, San Francisco, Oakland, Calif., and the Illinois county that contains Chicago have recently passed soda taxes similar in size to the tax in Mexico."


    • The Private Label Manufacturers Association (PLMA) is out with new Nielsen numbers showing that "store brands are gaining market share against the big national brands in America’s fastest growing retail channels."

    According to the report, "For the 52 week period that ended 12/24/2016, retailers’ brands strongly outperformed the national brands in the rapidly-growing mass merchandisers segment of Nielsen’s total outlets database, which includes national retailers such as Wal-Mart and Target, as well as some warehouse clubs and dollar store chains. Private label dollar volume in the mass merchandisers/club/ dollar store segment climbed +4.4% to $49.6 billion, resulting in a +0.5 point market share gain to 16.6%. A similar pattern emerged in regard to units, with private label advancing +4.2% compared to only +0.2% for the brands. As a result, private label’s market share moved up +0.6 of a point to 19.7%."

    The report goes on: "Store brands’ market share declined in the slow-growth supermarket channel – measured at 18.4% dollar share and 22.3% unit share – as well as in Nielsen’s all outlets combined sector, but the data clearly indicate that, separate from the adverse impact of supermarket numbers dragging down the overall private label results, market shares for retailer brands in the other outlets have experienced solid gains at the expense of national brands."


    • The National Retail Federation (NRF) is out with a study saying that "a record low number of Americans will spend their tax returns this year while the second-highest number on record will put the money into savings ... Of the 66 percent who are expecting a refund this season, only 20.9 percent of consumers will spend their refunds on everyday expenses, 8.7 percent will use them for major purchases such as a television, furniture or a car, and 7.6 percent will splurge on special treats like dining out, apparel or spa visits."

    The trend seems to indicate that "financial security continues to be top-of-mind for all Americans," according to NRF.


    Reuters reports that "a third of U.S. adults are eating out less frequently than three months ago, mostly because of cost ... Penny-pinching diners and intense competition from supermarkets, meal kit sellers like Blue Apron and upstart grocers such as Amazon.com have been a growing problem for restaurants.

    "Annual traffic to U.S. restaurants has been flat or up just 1 percent since 2009, when there was a 2 percent drop in the wake of the debilitating financial crisis."

    The numbers are based on a new Reuters/Ipsos survey that it says "illustrates the challenge for U.S. restaurants seeking to revive traffic after zero growth in 2016."


    Advertising Age reports that McDonald's, "reeling from an industrywide restaurant slump and slowing growth from its all-day breakfast push, is looking to beverages to help perk up the business. The fast feeder "plans to offer $1 sodas and $2 McCafé specialty drinks across the U.S. It's turning to higher-margin beverages at a time when cheap grocery prices are prodding more Americans to eat at home."


    • In Scotland, Holyrood reports that "in what will be widely seen as a massive U-turn, the soft-drinks giant Coca-Cola has thrown its support behind calls for the Scottish Government to introduce a deposit return scheme, in an effort to reduce littering and boost recycling." While Coke previously had opposed any bottle/can deposit laws, the company says that ongoing conversations about environmental issues in Scotland had persuaded it to change its tune.
    KC's View:

    Published on: February 23, 2017

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    Business Insider reports that "Starbucks' brand has taken a beating since the company announced plans to hire 10,000 refugees worldwide in the next five years in response to Donald Trump's executive order intended to prevent refugees from entering the US. 
    The coffee giant's consumer perception levels have fallen by two-thirds since late January, according to YouGov BrandIndex."

    The story notes that "YouGov says that there's reason to believe backlash will impact the chain's bottom line. Two days before Starbucks' announcement, 30% of consumers said they'd consider buying from Starbucks the next time they were craving coffee, the highest proportion in nearly a year. Now, the percentage is down to 24%, according to YouGov. 
    While many customers were immediately supportive of Starbucks' actions to support refugees, others threatened to boycott."

    The Business Insider story points out that some of the negative reaction seemed to stem from a belief that Starbucks' plans to hire refugees rather than veterans - a belief that was fundamentally inaccurate. Starbucks, in fact, "does have a program in place to support veterans and their families, hiring 8,000 veterans and military spouses since 2014 — an initiative the chain has attempted to highlight in recent days and weeks online and on social media."


    Axios has a fascinating piece worth reading about the spread of automation technology, and specifically how it will affect the trucking business - and every industry that depends on the transport of merchandise on the nation's highways.

    Indeed, the story also shows a map that indicates where the jobs will be lost - and it is not a niche issue. "The impact of self-driving trucks would be felt in communities around the country," the story says, and especially in parts of the country where support for President Donald Trump is greatest. The problem, of course, is that this could result in jobs that will go away - and not to Mexico or other foreign countries. Which creates public policy challenges that need to be addressed.

    You can read the story here.
    KC's View:

    Published on: February 23, 2017

    MNB yesterday took note of a new JP Morgan analysis saying that not only is Whole Foods working hard not to play the price game in the face of new competition, but that the average 'on-shelf price' at Whole Foods in January, was 34% higher than at Kroger.

    Got the following email from a Whole Foods executive who also is an MNB reader:

    Admittedly, I do not have insight into that side of the business, but from my personal experience, Whole Foods products are generally more expensive because they are more expensive food. You can’t compare Whole Foods store brand to a Kroger store brand because the Whole Foods 365 brand uses better, more expensive ingredients. For example, the semolina flour in the mac and cheese would not be bleached and bromated or contain corn syrup solid fillers like other store brands might. And for identical name brand natural and organic products, in many grocery stores these items are in a separate section of the store and the prices are really jacked up. Are they comparing overall prices across the store, or certain products that are the same across all stores? Apples and oranges….another example, when Whole Foods sources cherries, they source the ones with higher meat to pit ratios and higher sweetness factors. It’s not just a matter of prices at checkout. Whole Foods quality standards make the products it sells more expensive to produce.

    Plus, the products at Whole Foods are vetted at a whole different level than conventional products and (if anyone cares), I believe the team members are also paid better.





    We continue to get email about other readers' reactions to the New York Times report that the Washington State Supreme Court has ruled that "a florist who refused to sell flowers for a same-sex wedding cannot claim religious belief as a defense under the state’s anti-discrimination laws." Washington Attorney General Bob Ferguson said the ruling made the point that “sexual orientation is a protected class — just like race, just like religion.”

    MNB reader Jeff Gartner wrote:

    Kevin, I continue to be astounded (but really not surprised) by those who claim their "religious freedom" is usurped by others INTOLERANT of their prejudice against gays, blacks, Asians, Latinos, Muslims, Jews, Catholics, etc. 

    Your reader who states "Tolerance must to be a 2 way street" to legitimize her prejudices is making an unconstitutional claim when it's applied by businesses serving the public. We should NOT be tolerant of such prejudice.

    Religious freedom is misdirected to serve as an excuse to persecute and discriminate. It makes me want to join the Pastafarians in the Church of the Flying Spaghetti Monster … is it really any more ridiculous than the religious practice of that letter writer?

    Thanks for the column, it's good to vent.


    MNB reader Mike Moon wrote:

    I always thought those merchants who would refuse their goods or services to ANY customer who was willing to pay for it were foolish and needed to be in another line of work. I also thought that those who were refused service would simply vote with their pocketbooks and take their business elsewhere.

    Your recent comment, however, that blacks who were refused service at lunch counters also had other options really got my attention; I had not thought of things that way.  I'm never in favor of additional regulation, or government intrusion, but this may be one of those instances where it may be needed.





    On the subject of digital advertising, and why companies are spending more on it without necessarily getting commensurate returns, one MNB reader wrote:

    >b>Perhaps marketers should talk with their targets and find out what they’re doing when their ads pop up.  They might find “less is more.”  I stopped looking at ads years ago.  It’s too much.  I’ve been driven away from websites because of pop-ups and auto-play videos (if there is a way to turn those off on my computer, I’d love to hear the secret).  I’ve made mental notes to NOT buy a product because I’m tired of being bombarded with their ads.  I’ve turned off the TV a number of times because I’ve had to sit through sooo many commercials that I’ve either lost interest in the show I was watching or even forgotten what show I was watching.
     
    Some of us remember the days when commercial breaks were only 30-60 seconds long.  They weren’t even long enough to get up and get a drink of water.  You watched the commercials.  Nowadays, you take a shower, cook a meal, and phone your loved ones during commercials.  Now it’s the show that interrupts your activities; not the commercials that interrupt your show.




    I responded to yesterday's news about Toys R Us laying off HQ personnel with a comment about how I always hated going there when my kids were young, which prompted one MNB reader to wrote:

    I am certainly well past my child raising years and I haven’t been in a Toys R Us store for decades, until this past holiday season. We had both of our grandsons and their parents for Christmas and New Year’s. I went toy shopping at the Toys R Us in Manchester, CT and found the store in great shape, ready for business and staffed very well. The front end service was fast and courteous. There was even a Lego representative in the isle helping geezers like me choosing the proper age specific items. Just possibly, Toys R Us is spending their labor dollars where they are the most effective, in their stores.

    Maybe.

    I still think I'll stick with Amazon when the time comes.




    One MNB reader wrote in the other day about what I had called "the risks for companies and business leaders that may be associated with taking political positions," and pointed out that Trump dominated the popular vote everywhere except metropolitan California, the Northeast or the Northwest. Businesses catering to the rest of the country may not be risking anything by associating themselves with Trump policies, he said.

    Prompting another MNB reader to write:

    We’ll see how happy people in those 31 states are if a border adjustment tax raises prices of imported products by 20 %.

    Or retailers in Texas or Florida who suffer due to mass deportations of their customers.

    I live in Georgia, one of the 31 states that voted for the president and personally have never been more disappointed in the role model we have leading our nation.


    The various town halls taking place around the country, in which elected officials seem to be facing some push-back from voters, suggest that all may not be as it seemed in some of those 32 states. The situation is fluid, and there are a lot of moving parts ... and this remains a remarkable time in US history.
    KC's View:

    Published on: February 23, 2017

    News from the final frontier...

    Scientists have identified seven Earth-size planets orbiting a dwarf star named Trappist-1, about 40 light-years, or 235 trillion miles, from our planet.

    The New York Times writes that this is "quite close in cosmic terms, and by happy accident, the orientation of the orbits of the seven planets allows them to be studied in great detail. One or more of the exoplanets in this new system could be at the right temperature to be awash in oceans of water, astronomers said, based on the distance of the planets from the dwarf star."

    Their location, the story says, offers "the first realistic opportunity to search for signs of alien life outside the solar system."
    KC's View:
    Wow.

    I know this has nothing to do with business ... though I suspect Amazon already is trying to figure out efficient delivery routes for a couple of those planets. But I can't help myself. This is a huge story. It is what Joe Biden would've called a "BFD."

    I certainly hope that more than one of these worlds is inhabited, if only because it will put the toxicity and pettiness of our political debates into context. Intelligent life on another planet would teach us that not only are we not alone, but we are not even necessarily superior ... and that we should be willing to accept infinite diversity in infinite combinations.

    Though if any of those planets are inhabited by advanced species that come to Earth to make first contact, they should be prepared to be turned away if they have not been properly vetted.